Torrid Reports 7.7% Sales Drop in Q2

Key Points

• Net sales (GAAP) dropped 7.7% year over year to $262.8 million in Q2 FY2025, matching company guidance but highlighting weaker comparable sales and margin compression.

• Gross profit margin (GAAP) fell to 35.6% in Q2 FY2025, with GAAP profit and earnings per share saw sharp declines from the prior-year period. amid tariffs, incremental marketing investment, and store closures.

• Management cut full-year guidance for both net sales and Adjusted EBITDA (non-GAAP), signaling continued caution due to ongoing operational headwinds and macro pressures.

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Torrid (NYSE:CURV), a leading retailer specializing in plus-size women’s apparel, released its results for the second quarter of fiscal 2025 on September 4, 2025. The company reported that its net sales and Adjusted EBITDA matched internal guidance, but the period saw significant declines in key financial metrics compared to the same quarter last year. Net sales (GAAP) were $262.8 million, a decrease of 7.7%. Adjusted EBITDA and net income fell by 37.8% and 81.2%, respectively, as tariff pressures, higher marketing costs, and accelerated store closures all weighed on profitability. Yet, the results reflected persistent challenges, especially in gross and EBITDA margins. Management trimmed full-year net sales and profit guidance, emphasizing a cautious outlook for the months ahead.

Inside Torrid’s Business and Recent Strategic Focus

Torrid is built around delivering fashion-forward, comfortable apparel for plus-size and mid-size women—a segment it believes is underserved in the larger retail market. The company’s core strengths include its proprietary approach to design and fit, using real customer data and in-house R&D to create stylish and comfortable clothing tailored specifically for its demographic. These competencies are supported by a unified commerce strategy that blends online and physical stores, aiming to provide content-driven, omnichannel shopping experiences.

Over recent quarters, the company has prioritized several strategic shifts. Expanding digital sales, rationalizing its store fleet, and scaling new high-margin sub-brands have been central themes. Torrid relies heavily on data-driven product development and customer engagement via loyalty programs. Success depends on how well the company manages store closures, transitions customers to digital channels, and protects margins amid trade and sourcing headwinds.

Quarter in Review: Revenue, Margins, and Operational Moves

The quarter underscored ongoing operational and financial pressures for Torrid. Net sales declined by 7.7% (GAAP), in line with a lowered internal forecast, while comparable sales—a key industry measure reflecting store and digital sales growth excluding new store openings or closures—dropped 6.9%. Gross margin deteriorated by 3.1 percentage points to 35.6%. Adjusted EBITDA margin fell to 8.2%, leaving profit before taxes (GAAP) sharply lower compared to the prior year’s period.

The steep fall in net income—from $8.3 million down to $1.6 million (GAAP)—reflected not only weaker sales but higher costs from marketing and tariffs. Tariff costs remained a key challenge, prompting sustained focus on alternative sourcing and expense mitigation. The company noted that $40 million out of a $50 million total tariff headwind had already been mitigated through various sourcing strategies. However, the remaining exposure of up to $10 million continues to pressure margins and remains a central management focus.

Another key development was the acceleration of store closures, with Torrid ending the quarter with 575 stores, 82 fewer than at the same period in the prior year. Management reported that 59 stores had closed so far, as part of a plan to shutter up to 180 locations over the full FY2025. The rationale is to focus resources on more productive sites and speed up the shift to digital sales, which was approaching 70% of total revenue in the prior quarter. However, the business continues to grapple with transferring closed-store sales online and maintaining customer momentum amid a smaller physical footprint.

Inventory levels were $130.2 million (GAAP) as of quarter end. Marketing investment is being ramped up in the second half, reflecting renewed focus on brand engagement and sub-brands. On the balance sheet side, liquidity narrowed, with cash and cash equivalents (GAAP) at $21.5 million versus $53.9 million for Q2 FY2024, and operating cash flow turning negative for the first time in several periods during the first six months. The company also repurchased $20 million of its shares in the first half, while continuing to prioritize debt reduction.

Sub-Brands, Product Innovation, and Store Channel Shift

Management continues to highlight the company’s core differentiators in proprietary fit, size inclusivity, and exclusive designs. Torrid creates apparel using a process in which garments are tested on real models in its target demographic, with fabrics and cuts tailored to plus-size body types. This strategy sets it apart from peers whose products may be adaptations of straight-size patterns. While the company’s messaging around these unique brand attributes remains consistent, the current quarter’s report did not include the detailed sub-brand sales or customer engagement figures that were highlighted in prior calls. In earlier quarters, management cited names like Festi, Belle Isle, Nightfall, and Retro Chic—collections that exceeded expectations after launch—but recent results do not quantify their continued impact.

Similarly, the transition to a digital-led commerce model is progressing, but without fresh numbers on digital sales penetration in the release. Previously, management indicated expectations of reaching a low- to mid-70% digital mix by fiscal 2026, but this quarter offered no updates. Store closures continue as planned, with the stated goal of optimizing the retail fleet and supporting higher digital engagement—both viewed as necessary to stay competitive and serve customers as shopping preferences evolve.

Tariffs remain a pivotal concern. After final tariff announcements in July, Torrid anticipates up to $10 million of additional tariff-related expense exposure—contributing to a total $15 million Adjusted EBITDA headwind. To manage this, the company has paused its shoe category (previously 100% China-sourced), removing $40–$45 million in annual revenue from the outlook. Management expects to mitigate the vast majority of the tariff cost through sourcing and expense optimization, but the longer-term margin structure remains uncertain until external conditions stabilize.

Torrid’s data-driven approach—especially in marketing, inventory control, and product development—remains a talking point, but the earnings release offered fewer specifics about loyalty program trends or new digital tools. However, the current quarter’s commentary provided little new detail on customer file size or engagement, leaving investors with questions about the business impact of ongoing digital and product innovation efforts.

Looking Ahead: Guidance and Key Watchpoints

For the third quarter of fiscal 2025, management issued a net sales outlook of $235–$245 million, pointing to further sequential slowdown, and forecast Adjusted EBITDA of $16–$21 million. Full-year projections have also been reduced, with net sales now expected in the range of $1.015–$1.03 billion and Adjusted EBITDA (non-GAAP) between $80–$90 million. Both are lower than the guidance given after Q1 FY2025, reflecting greater caution around macroeconomic pressures, tariff risks, and the effects of the store fleet optimization strategy. No further or new metrics on customer loyalty, digital mix, or sub-brand performance were provided by management.

Investors will likely focus on the pace and effect of further store closures, the transfer of sales to digital channels, cost mitigation strategies for tariffs, and overall margin trends in the back half of the year. Management’s commentary suggests no material change in the digital and product innovation strategy, but emphasizes ongoing expense control and marketing investment to support future growth. The next several quarters will reveal whether current initiatives translate to improving trends in sales growth and profitability, or if ongoing external and internal headwinds persist.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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